Balance sheet and income statement data indicate the following: Based on the data presented above, what is the number of times bond interest charges were earned (round to one decimal point)?
A) 3.7
B) 4.4
C) 4.5
D) 3.5

Question

Balance sheet and income statement data indicate the following:  Based on the data presented above, what is the number of times bond interest charges were earned (round to one decimal point)?
A) 3.7 
B) 4.4 
C) 4.5 
D) 3.5

Quizplus · Accepted Answer

To calculate the bond interest coverage ratio, we divide the EBIT by interest expense. From the income statement, EBIT is $23,000, and from the balance sheet, the interest expense is $5,111. Thus, the bond interest coverage ratio is 23,000/5,111 = 4.5. Therefore, the correct answer is C, 4.5.

Balance Sheet and Income Statement Data Indicate the Following